getting my house

Chapter 7 second mortgage discharged - new note holder threatening to foreclose

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Hi Everyone,

I apologize in advance if I am in the wrong forum.

I am posting on behalf of a dear friend of mine.

Here is what I know:
We are in Arizona
2007 Refinanced and took out second mortgage
1st = 200K
2nd = 85K

Approx 2009 they filed Chapter 7 which included discharging the 2nd mortgage (Nov 2010). They were advised at that point to file Chapter 13 a few months later to remove the lien on the second, but they never did.

Fast forward almost 4 years later. They are CURRENT on their first mortgage with a balance of approx $180
They received a letter from Trustee Corps the trustee for "Partners for Payment relief" stating they will foreclose on the SECOND mortgage unless they do one of the following: do a loan mod with PPR, forebearance, Deed in Lieu, repayment plan, reinstatement of loan, short sale, assumption of loan.

Basically give us your house. The biggest unbknown right now is whether they have equity or not.


googled PPR and they sound REALLY BAD. Here's a page a found:

Sounds like JDB to me

Looked at county recorded docs and they have indeed foreclosed on people here in AZ. And the paper trail is ridiculous:

Bank assigns to a trustee, trustee assigns to PPR, PPR assigns to Trustee Corps, Trustee Corp files foreclosure sale paperwork, foreclosure occurs, Trustee Corps assigns back to PPR. In some cases PPR assigns deed to some investor (this may be the assumption part), who then may foreclose.

They also have a few lawsuits out there in AZ and other states.


What I am wondering is there anything they can do besides a Chap 13 (so long as they are underwater on the first) or 11 to stop the foreclosure.

I posted on "lawyer will answer your question" website and one lawyer stated:

We have had some discharged lenders holding second mortgages and their debt buyers threaten foreclosure even though the debts were largely or entirely under water. We have suggested to them that this technique is a violation of the discharge order since it is a bad faith effort to force collection of a discharged debt. We have also suggested to the debt buyers that they are violating the FDCPA as well.
So far, they have all backed off.


Anybody ever deal with this? Sued people like this? Won? It seems like this should be illegal, but I havent heard that yet since the second lein is still in place.


I also believe this is going to be a big thing in the near future - Note buyers on defaulted mortgages - since some housing areas are on the comeback.

Thanks Much in advance

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I'm not  a lawyer...but this does sound fishy.  A BK 7 wipes out the debt.  At most, it might be possible that the 2nd mortgage or their "assigns" have a lien on the property that would have to be satisfied if the property were sold, but the first mortgage holder is the only one that could foreclose.


You can check with the BK Trustee to see if they'll give advice or look to see if there is a consumer lawyer in your area who will take the case.

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Thanks willing.


There is a lein on the property from the Chap 7. Like I mentioned above they were advised by their lawyer to file a 13 after the fact to get rid of the lein and never did.


As well this JDB is somehow foreclosing on the entire property on defaulted second mortgages. On another website someone mentioned if the JDB is willing to service the first loan then they can foreclose. That's a huge risk in my book. One of the homes this company forecolsed on is listed for sale.


Thanks for your feedback.

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The creditor can't try to collect the money, but they can foreclose - even after discharge in chapter 7 - because they still have the lien.  Anyone with a lien can foreclose.  Either they think there is equity OR it is mere threat to get your friend to shuck over some dollars.  Seems to me though that attempting to collect actual $$$$ in any form is a violation of the BK discharge.  .They would have to be very careful how they phrase any efforts to collect so as not to be in violation. 


If it were me, I would return to my BK lawyer and let him/her know what's going on.  Or get counseling from another BK attorney.


Equity should not be a big unknown.  Determining value is not that difficult.  Lot of sites online do it for free.  All that's needed is a close approximation.  The creditor should not be interested in foreclosing unless there is REAL, POSITIVE value in the property AFTER all expenses of foreclosure.  If they foreclosed on other people, there must have been value.  Even JDBs aren't that dumb.  Though I can imagine them taking the threat so far as to file the foreclosure figuring the homeowner will shuffle up a plan to do something to keep their home - then they can motion to dismiss the foreclosure complaint.  After all, they know your friend wants to keep the home cuz they have undoubtedly pulled credit & know payments on the 1st are timely.


My 3 cents.

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